The Chancellor’s 2016 Budget delivered a mixed bag for home owners. In general savers are benefitting from changes to the rules around ISAs, and the introduction of ‘Lifetime ISAs’. But buyers and sellers have been hit hard, and Landlords in particular will see a difference in their pockets.
We’ve summarised a few of the key points for homeowners.
Additional 3% Stamp Duty on 2nd homes
From April 2016, anyone purchasing an additional property to their main residence will pay 3% extra stamp duty. This means all landlords looking to buy property will be hit by the extra charges, regardless of whether they purchase as a company or individually.
Large investors had expected to be exempt, but The Chancellor has announced that that anyone looking to purchase a residence in addition to their main residence will be hit by the additional 3% fees, including those with more than 15 properties.
For those selling a property in order to purchase a new property, but where the ownership of the two overlap, home owners will have 36 months in which to apply for a refund on the additional stamp duty.
It is expected that this change will raise an additional £1 billion by 2020, and George Osborne has pledged that this money will be put towards community housing trust projects.
Capital Gains Tax for Landlords
Landlords had been hoping that they would be included in the reduction in Capital Gains Tax, but The Budget revealed that residential property would be excluded from this change and would remain at 28% for higher rate taxpayers and 18% for basic rate taxpayers.
In general, it means that a £50,000 gain (above the allowance) made from selling a property will leave a basic rate taxpayer with £41,000 or a higher rate taxpayer with £36,000.
Compare that to the same £50,000 gain (above the tax-free allowance) in shares, the basic rate taxpayers keep £45,000, while higher rate taxpayers would be left with £40,000.
Insurance Premium Tax
Insurance Premium Tax was already put up in November 2015, from 6% to 9.5%, but The Chancellor’s Budget has seen this increase again, to 10%.
This will mean an approximate increase of £1 per year on home insurance policies, and £2 per year on Motor Insurance policies.
Starting from April 2017 anyone under the age of 40 will be given the opportunity to open a Lifetime ISA. This ISA will allow savers to save up to £4,000 per year, with savers being given an additional £1 for every £4 saved. The ISA limit is also being increased from £15,240 to £20,000.
Stipulations on the ISA means that money can only be saved until the age of 60, and it must be used to fund either pensions or to buy a home.
From April 2017, two new tax-free allowances will be introduced. Entrepreneurs who earn small amounts of money, will have two tax-free allowances for up to £1,000 – one for selling goods or providing a service (like selling on eBay) and another for income from property (like renting a driveway).
To find out how The Budget will affect your and your family, take a look at the handy calculator on the BBC website.
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Published 18 March 2016